01 February 2024
The accounting regulations have been modified to replace the non-financial statement with sustainability reporting, according to a recently formalized order by the Ministry of Finance (MF). However, the new reporting applies to more companies than the non-financial statement.
The MF Order 85/2024 was recently published in the Official Gazette, aiming to transpose the European directive known as CSRD (nr. 2.464/2022) into our national legislation. The new provisions will be implemented gradually, starting from the financial year 2024, with thousands of companies expected to start sustainability reporting.
The document first specifies the elimination of current provisions regarding the non-financial statement, mandatory for entities exceeding an average of 500 employees during the financial year and included in the administrators’ report. This requirement was introduced only a few years ago in the accounting regulations for individual annual financial statements and consolidated annual financial statements (MF Order 1.802/2014) and is valid only until the financial statements for the year 2023.
Subsequently, three completely new chapters for sustainability reporting (including consolidated reporting) have been added to the accounting regulations, targeting many more companies than the non-financial statement, focusing on large and medium-sized entities that, at the balance sheet date, exceed the limits of at least two of the following three criteria:
- Total assets: 17.5 million lei (equivalent to 3.9 million euros)
- Net turnover: 35 million lei (equivalent to 7.8 million euros)
- Average number of employees during the financial year: 50
Sustainability reporting includes information on environmental, social, human rights, and governance factors, including sustainability factors. The new reporting is also part of the administrators’ report and must adhere to certain standards set by European authorities. MF Order 85/2024 specifies that reporting includes, among other things:
- A concise description of the entity’s business model and strategy, including aspects such as the resilience of the business model and entity strategy regarding sustainability-related risks, opportunities for the entity regarding sustainability, or entity plans to ensure that its business model and strategy are compatible with the transition to a sustainable economy and the limitation of global warming to 1.5°C, aiming for climate neutrality by 2050.
- A description of specific sustainability-related objectives set by the entity, including, if applicable, absolute emission reduction objectives for at least 2030 and 2050.
- A description of the roles of administrative, management, and supervisory bodies regarding sustainability matters.
- A description of the entity’s policies regarding sustainability.
Regarding its applicability, the Ministry of Finance has set a compliance schedule for companies, depending on their financial year. Specifically, the provisions related to the new reporting apply to financial years starting on – for standard financial year, or after:
- January 1, 2024: (i) public interest entities exceeding the criteria for large and medium-sized entities, and also the average number of 500 employees during the financial year; (ii) public interest entities that are parent companies of a large group, exceeding, on a consolidated basis, the average number of 500 employees during the financial year.
- January 1, 2025: (i) entities exceeding the criteria for large and medium-sized entities and (ii) entities that are parent companies of a large group, other than those mentioned in the first point.
- January 1, 2028: entities that are subsidiaries based in Romania whose ultimate parent companies are regulated by the law of a third country.